Rapaport Magazine

Transparent thinking

The industry saw a slew of responsible-sourcing pledges this past year. What have companies and trade bodies been doing to achieve those goals?

By Rachael Taylor

In a year defined by global crises, it would be easy to imagine that issues such as supply chain transparency got lost in 2020. If anything, though, the opposite was true: Companies and consumers were forced to slow down, and so found time for deeper reflection on how they were conducting business.

For the diamond industry, the past year has been about setting plans for the next decade and catching up with consumers’ expectations of responsible sourcing. A number of forward-looking reports on the subject came out in 2020. In September, Tiffany &. Co published a document titled “2025 Sustainability Goals,” which captured headlines with its pledge to “achieve 100% traceability” for the precious metals and “individually registered diamonds” in its collections over the next five years. Then, a couple months later, De Beers published its own transparency action plan, titled “Building Forever.” This “blueprint for a better future — one that is fairer, cleaner and healthier” — set out goals for what the company might look like by 2030.

As with Tiffany, a key component of the De Beers plan was to offer consumers a clear view of the diamond supply chain and to record most of the miner’s annual production by value, using its proprietary Tracr blockchain solution. Right now, the number of De Beers diamonds logged in Tracr represents 15% of annual value.

“The pandemic has only reinforced the importance of sustainability, further accelerating consumer and stakeholder trends and expectations that were already underway with regard to responsible sourcing and social purpose,” says David Johnson, head of corporate communications at De Beers. “Consumers increasingly want to know about a diamond’s provenance — who produced it and the impact it has made — so provenance and traceability programs will be an important consideration for all trade participants in the years to come.”

Big vs. small

For companies like Tiffany and De Beers, which have vertically integrated operations that run from mine to store, delivering full transparency shouldn’t be too difficult; they control their entire supply chains. For smaller companies, it is a much more daunting process. Despite the reputational benefits of doing so, the drive for suppliers to comply with traceability efforts is having a polarizing effect, says Gaetano Cavalieri, president of the World Jewellery Confederation (CIBJO).

“It has become increasingly difficult for suppliers to access lucrative supply chains if they do not [hold to] certain compliance standards,” he says. “Full traceability remains very difficult, but transparent due diligence at the company level is definitely more commonplace today than it once was. This has had the effect of increasing the volume of goods in the market that reliably can be shown to have been sourced responsibly, but it is also creating a situation where a relatively small number of well-financed companies are able to introduce comprehensive compliance systems, [while] small, less capable companies are left on the sidelines.”

That doesn’t mean smaller brands should give up hope, according to former De Beers vice president of sales Nicholas Moltke. After spending 16 years at the mining giant, he left to start Beabond, a Botswanan-inspired fine-jewelry brand that only uses diamonds mined in the African country.

“I lived in Botswana for five years, and I know the positive impact that diamonds have on the community and the country as a whole,” he says. He wanted to support this through Beabond and used his contacts from his De Beers days to buy rough diamonds directly from the source. He would then have them polished in India — though he hopes to switch to polishing houses in Botswana one day.

To boost consumer confidence in Botswana diamonds, he also founded a certification service six months ago called Botswanamark. Much like Canadamark, it involves laser-inscribing diamonds of 0.20 carats and above to make them traceable, and is available to everyone in the industry.

The value of collaboration

While Moltke has found a sustainable solution for his emerging brand, he admits it would have been difficult to accomplish without his De Beers experience and contacts. However, he believes that independent brands and stores have a better chance of ensuring traceability if they team up when approaching mines.

“Most large manufacturers are looking for scale,” he explains, suggesting that collective buying power could open up conversations with miners and polishers.

Collaboration has been a key theme of diamond transparency efforts in the past year. In addition to companies’ individual pledges, there have been a number of cooperative ventures. The Responsible Jewellery Council (RJC), which saw its membership grow significantly during the pandemic, launched and bolstered several of these, including a partnership with the World Diamond Council (WDC) to “increase knowledge-sharing, pilot new initiatives, and increase the positive impact they both make.”

“We need greater collaboration, transformative partnerships and collective responsibility across all parts of the value chain,” says RJC executive director Iris Van der Veken, who has spearheaded a webinar-based educational push to help businesses attain transparency. “In a very short period of time, it has become amply evident [due to Covid-19] that the health of our planet and people is inextricably linked to the health of our businesses. We are only as strong as our weakest link; if this was a platitude or cliché earlier, it is a fact now. We need to look at our supply chains as interconnected economic and social webs where we must protect the most vulnerable.”

Technological solutions

In December 2020, the RJC released its own “Roadmap to 2030 and Beyond.” Its core ethos went beyond aspirational goals to practical solutions, including ways of better harnessing technology through a “digital transformation strategy.”

“We believe it is critical to have credible data to show how RJC members are improving their management practices over time — hence the need for a fully integrated portal [to aid data collection and service provision],” Van der Veken elaborates.

Using technology to promote diamond traceability is a keen focus for the wider industry as consumers seek solace in facts rather than fluffy marketing messages. Many have pinned their hopes on blockchain as a way to track diamonds on their journey, and there are a number of projects taking that approach.

Among them is Gübelin Gem Lab’s Provenance Proof program, which launched four years ago and is now in use at 300 companies, according to the Swiss-based laboratory. De Beers, meanwhile, launched its Tracr pilot in 2018 with a number of high-profile retailers on board, including Signet Jewelers and China’s Chow Tai Fook. In a show of the industry’s increasing willingness to collaborate on transparency efforts, Russian miner Alrosa — which accounts for 27% of the world’s diamond mining — signed up to Tracr in 2020.

Another tech player making waves in the diamond sector is blockchain company Everledger, which provided the technology for Provenance Proof. It is also working with Rare Carat — a digital diamond search tool that describes itself as “America’s number-one ring marketplace” — to highlight fully traceable diamonds.

“There is a moral obligation in this industry that we all have to work toward greater transparency,” says Rare Carat chief operating officer Apeksha Kothari, who believes the greatest challenge of this project was finding the right language for explaining the tech to consumers. “It is sometimes easy to sit in a trading center, or in retail, and pretend there is no need to take action because you are not involved earlier up the supply chain. But inaction is often the same as acceptance.”

Working out the kinks

Despite its widespread adoption, blockchain has faced its share of criticism. While no one can alter the information once it’s in the system, the entire scheme depends on trusting those who enter the data to tell the truth.

“Blockchain technology is only as strong as the weakest link,” says Rafael Papismedov, managing partner at diamond-focused tech company HB Antwerp. “If false information is inserted in the blockchain, all along the way, the false data will keep on circulating.”

This is why HB Antwerp is taking a more hands-on approach to the diamonds it certifies by “taking full control of the supply chain.” In July, it entered into an exclusive partnership with diamond miner Lucara to purchase all diamonds of 10.8 carats and above from its Karowe mine — accounting for 70% of Lucara’s annual income. The price HB Antwerp pays Lucara for the rough is based on the estimated polished outcome, minus fees and manufacturing costs.

HB Antwerp then scans, analyzes, cuts and polishes the rough stones at its Belgium facilities, which were custom-built at a cost of “millions of dollars.” Every step of the process is registered in a blockchain so retailers and end consumers can access the information.

“We are proud that for the first time in diamond history, different partners of the supply chain are fully aligned, sharing complete data and information of the process from mine to consumer,” says Papismedov. The diamond industry has long been criticized for taking a slow approach to transparency. However, with the pandemic focusing consumer values on ethics, the environment, and gender and diversity issues — which have also been cornerstones of diamond companies’ roadmaps this past year — it seems the time has come for industry players to get on board with transparency, or risk being shut out of the business.

‘Ethical claims aren’t enough’Marc Choyt, cofounder of retailer Reflective Jewelry in Santa Fe, New Mexico, calls for more than lip service

“For many jewelry companies, corporate social responsibility (CSR) initiatives and marketing have become indistinguishable. If these companies get a few more consumers to buy their products by claiming to be ethical, then they will have achieved their real goal of increasing their bottom line. Many are quick to make claims, but few seem willing to open up their businesses to meaningful independent examinations or certifications. Rio Tinto can blow up 40,000-year-old caves at Juukan Gorge in Australia — an area of cultural significance to the Aboriginal people — as it did in May 2020, or wage a legal war with the Apache people over their sacred land in Arizona, as it is now, and still be certified as a responsible company by the Responsible Jewellery Council. Creating an agency that certifies ‘responsibility’ and functions as a trade group is a clever way to manage trade and consumer ethical narratives. The concept of transparency can be readily achieved when you already control from mine to market. Focusing on large-scale mining allows the industry to continue to shift attention away from critical human-rights and environmental-justice issues. That would be positive for the diamond industry, which wants to keep selling as much as possible without making any real changes to supply chains that could benefit exploited, impoverished small-scale diamond miners. Authentic responsibility would attend to current [and] historical atrocities and demand transparency across the diamond supply chain. Instead of using the term ‘conflict-free’ as a cover-up, we should talk about diamonds we can trace from a specific mine through a specific cutting factory versus those we can’t.”

Taylor & Hart: Harnessing the dataLike many of the major diamond players, online jeweler Taylor & Hart has created a sustainability roadmap, setting out its goals for 2025. One key element it has already rolled out is Diamond Time-Lapse — an initiative by one of its Indian diamond suppliers, Dharmanandan Diamonds.

Taylor & Hart’s main focus is bespoke engagement rings, and as such, it has an online diamond search tool. Consumers have always been able to refine the search by the 4Cs as well as price, but now there is also a button for country of origin. Each gem within the Diamond Time-Lapse scheme has an instantly accessible online report disclosing its source, lab reports, and a timeline of every point in the supply chain — complete with the names, ages, locations and even photos of the people involved. This has increased not just the company’s sales, but also customer interest, says Taylor & Hart CEO Nikolay Piriankov (pictured).

A commonly cited blockade to transparency is a lack of data about the supply chain, but Piriankov notes that “the polishing firms in India are sitting on all this data already. They never collected it to show customers, they just have it as part of their core process.”

Taylor & Hart onboarded Diamond Time-Lapse two years ago, and Piriankov estimates that 20% of diamonds on the site now have the reports; a further 15% simply list the origin. By 2025, the goal is for all Taylor & Hart diamonds to “have provenance stories we’re proud of” — a challenge the jeweler has already put to its suppliers. “Of our top seven suppliers, five are working on solutions,” Piriankov reports. “Transparency is very hard, and consumers have very high expectations. Unless [our suppliers] add that data, we’re going to cut them out of our business.”

Article from the Rapaport Magazine - May 2021. To subscribe click here.

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